Spain king's son-in-law in court on fraud charges

MADRID (Reuters) - The king of Spain's son-in-law appeared in court on Saturday on charges of fraud and embezzlement in a case which threatens to tarnish a royal family credited with steering the country from dictatorship to democracy.

The court in Palma de Mallorca ordered Inaki Urdangarin to testify in an investigation into alleged misuse of millions of euros in public funds at the non-profit Noos Institute, which he ran from 2004 to 2006.

"I appear today to demonstrate my innocence, my honour, my professional activity. For all these years I have discharged my duties and taken decisions properly and transparently," Urdangarin told reporters before entering the court.

Streets were cordoned off and security tightened to allow former handball player Urdangarin to enter the court in the Mediterranean holiday island's capital.

Hundreds of noisy protesters gathered chanting slogans against the monarchy and waving flags used when Spain last had a republican government, from 1931-39.

Urdangarin was given the title Duke of Palma after he married King Juan Carlos's daughter Princess Cristina.

The case against Urdangarin is one of several big fraud scandals in Spanish courts, most dating from a property and urban development boom when local governments went on spending sprees before the global financial bubble burst.

Spanish Deputy prime Minister Soraya Saenz de Santamaria declined to comment on the case on Friday, saying the government respected the courts' independence.

Spain's royals sidelined Urdangarin from official events shortly before he was charged at the end of 2011 and then disclosed details of their income for the first time.

Urdangarin moved with his wife and four children in 2009 to Washington, D.C., where he represents Spanish telecoms group Telefonica.

In an apparent reference to the case, the king said in his traditional Christmas speech that "all are equal before the law".

"When untoward conduct arises which is not in keeping with the law and ethics, society naturally reacts. Fortunately we live by the rule of law and any unworthy act must be judged and penalised," he said.

Spain's royals do not normally receive the same intense media interest as their British counterparts, but coverage has increased since Urdangarin was charged.

"We are trying to lead a normal life and you won't let us, that´s the problem," Princess Cristina told reporters in a Washington supermarket when they asked about her husband.

The king was named successor by Francisco Franco, but shortly after the dictator's death in 1975 he turned power over to Spain's first freely elected parliament in decades.

(Reporting by Enrique Calvo in Palma de Mallorca; Writing by Martin Roberts in Madrid; Editing by Ruth Pitchford)